It was a piece of boardroom theatre typical of JP Garnier.

Last month, the smooth-talking chief executive of GlaxoSmithKline sought to brush aside grumbles about the sluggish performance of the group’s share price and mounting concerns over the safety of its diabetes pill Avandia, by doubling its share buyback programme to £12 billion over two years.

The attention-grabbing step – taken just days before US regulators met to decide Avandia’s fate – certainly looked aggressive. As a carefully calibrated move designed to reassure investors at a tricky moment, it was also effective.

But while welcome to many, a bigger buyback hardly represents a remedy for GSK’s mounting ills.

Although Avandia appears to have escaped an outright ban in the US, GSK is still struggling with a 40 per cent slide in US sales of the drug, GSK’s second-biggest seller, which generated £1.4 billion in sales last year. The company is now thought to be considering slashing its sales force in response.

Meanwhile, GSK is also reeling from a string of setbacks on other promising drugs and, despite the imminent launch of several others, is unlikely to enjoy anything more than feeble sales growth in the months ahead.

While GSK remains a well-run company, awash with cash and with a stronger pipeline of new drugs than many rivals, there seems to be little opportunity for a sudden recovery in its languishing share price, which has underperformed the FTSE for years.

Meanwhile, GSK – along with all other big pharmaceutical companies – is facing a tangle of other woes: fierce competition from manufacturers of generic drugs, mounting political opposition to industry profits and continuing public mistrust.

Dr Garnier, who is due to stand down next May, had probably been wishing for an easier end to his career, but it is exactly this change in leadership that holds the key to the company’s fortunes.

Dr Garnier has earned plaudits for steady leadership and the adoption of an innovative new research model but he has steered clear of more radical changes with the potential to extract greater value for shareholders – for example, a sale of the group’s consumer healthcare unit, more extensive cost-cutting measures, a big merger or other fundamental adjustments to the group’s structure.

With fundamental questions increasingly being raised about the viability of the traditional Big Pharma model, the time for Dr Garnier’s moderate approach may be coming to an end.

More troubled rivals such as Merck, AstraZeneca and Pfizer have all been forced out of necessity, to consider a more radical approach.

Fortunes can change frighteningly quickly in the drug business and the danger is that GSK could be next. Stalling on painful changes now could be a mistake if GSK wants to avoid similar difficulties later on.

It seems unlikely Dr Garnier will change course course during his final months in charge, but his successor – almost certain to be one of three internal candidates – may think differently.

In the long term, GSK will need more than a bigger share buyback to guarantee its prosperity.

For investors, selling now would be a mistake but the question is how willing Dr Garnier’s replacement is to embrace the nettle of real change. Until he goes, the jury is out on whether a share price recovery could be on the way.

Hold at £12.84

Nord Anglia

Nord Anglia Education’s shares rose to a new high yesterday as it revealed that it had sold its nursery business for £31.2 million.

The loss-making division has struggled since 2005, when a damaging BBC exposé combined with an increase in competition from state nurseries to knock attendance. The division was expected to face continued poor trading this year and, although the sale will see a significant writedown of NordAnglia’s asset base, because the division is being sold for less than half its value on the books, it is good news in the medium term. The company can use the cash proceeds to pay down debt and, strategically, it can now focus on the faster-developing international schools and learning services divisions. These businesses saw revenue growth of 36 per cent and 28 per cent, respectively, in the first half. Plans to develop more schools and extend learning services in China, the Far East and the Gulf look promising.

Meanwhile, Brian Myerson, the activist investor who tried and failed to buy the company last year, still holds a 26 per cent stake. His block on bidding has now gone and he bought more shares in June. However, the stock is already trading at 24 times expected earnings for 2007 and NordAnglia pays no dividend. Meanwhile, the company needs to renegotiate its borrowing as a result of its reduction in assets before any thought of a new dividend can be entertained. Avoid for now.

Blacks Leisure

Not even the presence of the ubiquitous Mike Ashley – or rather his company, Sports Direct – on Blacks Leisure’s shareholder register with a 29 per cent stake has been able to stop the retailer’s stock diving 26 per cent in the past year, as it has issued profits warnings and slashed its dividend.

At the time of Sports Direct’s launch on the stock market, it was forced to put out a statement denying interest in Blacks, after Mr Ashley made loose comments about his interest in outdoor brands to complement his Karrimor backpack brand. Today that block is removed. But Mr Ashley is unlikely to make a swift attack. Having bought the stock at about 400p, some 18 per cent above the current share price, he is likely to wait until at least October, when he would be allowed to bid below the 400p price under Takeover Panel rules.

Blacks is still considering the sale of its Freespirit boardsports chain and Mr Ashley has made clear his opposition to that plan. That would suggest he still has an interest in the business as a whole and a bid is still in the water, so it’s best to hold and wait for developments.

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